Question 1

The Reagan tax cuts of the 1980s

Accepted Answer

A)  had not impact on the budget deficit. 
B)  decreased the budget deficit. 
C)  increased the budget deficit. 
D)  initially decreased the deficit but later increased it. 
A)  had not impact on the budget deficit. 
B)  decreased the budget deficit. 
C)  increased the budget deficit. 
D)  initially decreased the deficit but later increased it.

Question 2

If the government decides to change the level of government spending,what happens to the value of the multiplier?

Accepted Answer

A)  It becomes larger. 
B)  It becomes smaller. 
C)  It does not change. 
D)  It is impossible to predict. 
A)  It becomes larger. 
B)  It becomes smaller. 
C)  It does not change. 
D)  It is impossible to predict.

Question 3

Liberals tend to favor increasing taxes as the method of counteracting inflation.

Accepted Answer

A) True 
 B)False

Question 4

Why is the personal income tax considered to be one of the main features of our modern economy that helps ensure against a repeat performance of the Great Depression?

Accepted Answer

Income tax is considered an automatic st

Question 5

Figure 11-2  
-Which graph in Figure 11-2 best reflects a Keynesian's view of the short-run impact of an increase in the personal income tax rate?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 6

Define the following terms and explain their significance to the study of macroeconomics:
a.
fiscal policy
b.
transfer payments
c.
effect of income taxes on the multiplier
d.
supply-side tax cuts

Accepted Answer

a. Fiscal policy is the federal governme

Question 7

During the 2009-2010 stimulus debate,Republicans argued that increases in government spending would be more effective than decreases in taxes.

Accepted Answer

A) True 
 B)False

Question 8

If increases in government spending lead to inflation,the value of the multiplier is reduced.

Accepted Answer

A) True 
 B)False

Question 9

If wealthy U.S.consumers save most of their tax cut,this means that,compared to government spending changes,

Accepted Answer

A)  tax changes would have a higher multiplier effect. 
B)  tax changes would have a weaker multiplier effect. 
C)  government spending would have a weaker multiplier effect. 
D)  U.S.consumers would spend all of their tax cut. 
A)  tax changes would have a higher multiplier effect. 
B)  tax changes would have a weaker multiplier effect. 
C)  government spending would have a weaker multiplier effect. 
D)  U.S.consumers would spend all of their tax cut.

Question 10

The difference between a fixed tax and a variable tax is that

Accepted Answer

A)  fixed taxes can never be changed,but variable taxes can be changed. 
B)  a change in fixed taxes has no effect on aggregate demand,but a change in variable taxes has an impact. 
C)  a variable tax changes when GDP changes,but a fixed tax does not change with GDP. 
D)  a variable tax can be changed easily,whereas changing fixed taxes requires a constitutional amendment. 
A)  fixed taxes can never be changed,but variable taxes can be changed. 
B)  a change in fixed taxes has no effect on aggregate demand,but a change in variable taxes has an impact. 
C)  a variable tax changes when GDP changes,but a fixed tax does not change with GDP. 
D)  a variable tax can be changed easily,whereas changing fixed taxes requires a constitutional amendment.

Question 11

Supply-side policy is based on the assumption that people's economic behavior is not affected by taxes.

Accepted Answer

A) True 
 B)False

Question 12

How does the multiplier for a change in government spending compare to the multiplier for a change in taxes?

Accepted Answer

A)  It is smaller. 
B)  It is the same. 
C)  It is larger. 
D)  It cannot be calculated. 
A)  It is smaller. 
B)  It is the same. 
C)  It is larger. 
D)  It cannot be calculated.

Question 13

Which of the following will shift the aggregate demand curve outward?

Accepted Answer

A)  tax cuts and government spending cuts 
B)  tax increases and government spending increases 
C)  tax cuts and government spending increases 
D)  tax increases and government spending increases. 
A)  tax cuts and government spending cuts 
B)  tax increases and government spending increases 
C)  tax cuts and government spending increases 
D)  tax increases and government spending increases.

Question 14

During the 2008 presidential campaign,candidate Barack Obama argued in favor of repealing the majority of the Bush tax cuts in order to increase government revenue.

Accepted Answer

A) True 
 B)False

Question 15

As a result of the recent financial crisis,some analysts believed that the MPC in the U.S.declined.If this is true,the value of the multiplier is now

Accepted Answer

A)  smaller. 
B)  larger. 
C)  the same. 
D)  magnified to a larger amount. 
A)  smaller. 
B)  larger. 
C)  the same. 
D)  magnified to a larger amount.

Question 16

In an effort to balance the federal budget,an increase in Social Security taxes is passed.What is the most likely effect of this on equilibrium GDP?

Accepted Answer

A)  GDP will increase. 
B)  GDP will decrease. 
C)  GDP will not change but prices will rise. 
D)  GDP will not change but employment will increase. 
A)  GDP will increase. 
B)  GDP will decrease. 
C)  GDP will not change but prices will rise. 
D)  GDP will not change but employment will increase.

Question 17

Increasing aggregate demand with fiscal policy may have undesirable inflationary consequences.

Accepted Answer

A) True 
 B)False

Question 18

President Clinton,at the beginning of his administration,increased personal income taxes on individuals with relatively high incomes.How will this change the consumption schedule?

Accepted Answer

A)  It will shift and become steeper. 
B)  It will shift and become flatter. 
C)  It will shift in a parallel manner. 
D)  It will remain fixed as the economy moves along the schedule. 
A)  It will shift and become steeper. 
B)  It will shift and become flatter. 
C)  It will shift in a parallel manner. 
D)  It will remain fixed as the economy moves along the schedule.

Question 19

In the determination of disposable income,transfer payments are treated as if they

Accepted Answer

A)  are the same as taxes. 
B)  did not exist. 
C)  are the opposite of taxes. 
D)  were a constant amount. 
A)  are the same as taxes. 
B)  did not exist. 
C)  are the opposite of taxes. 
D)  were a constant amount.

Question 20

In the middle of a severe recession,Congress passes an increase in the level of unemployment benefits.This would be considered by economists as a

Accepted Answer

A)  positive tax. 
B)  negative tax. 
C)  form of government purchases. 
D)  variable tax. 
A)  positive tax. 
B)  negative tax. 
C)  form of government purchases. 
D)  variable tax.

The Reagan tax cuts of the 1980s

If the government decides to change the level of government spending,what happens to the value of the multiplier?

Liberals tend to favor increasing taxes as the method of counteracting inflation.

Why is the personal income tax considered to be one of the main features of our modern economy that helps ensure against a repeat performance of the Great Depression?

Figure 11-2 -Which graph in Figure 11-2 best reflects a Keynesian's view of the short-run impact of an increase in the personal income tax rate?

Define the following terms and explain their significance to the study of macroeconomics: a. fiscal policy b. transfer payments c. effect of income taxes on the multiplier d. supply-side tax cuts

During the 2009-2010 stimulus debate,Republicans argued that increases in government spending would be more effective than decreases in taxes.

If increases in government spending lead to inflation,the value of the multiplier is reduced.

If wealthy U.S.consumers save most of their tax cut,this means that,compared to government spending changes,

The difference between a fixed tax and a variable tax is that

Supply-side policy is based on the assumption that people's economic behavior is not affected by taxes.

How does the multiplier for a change in government spending compare to the multiplier for a change in taxes?

Which of the following will shift the aggregate demand curve outward?

During the 2008 presidential campaign,candidate Barack Obama argued in favor of repealing the majority of the Bush tax cuts in order to increase government revenue.

As a result of the recent financial crisis,some analysts believed that the MPC in the U.S.declined.If this is true,the value of the multiplier is now

In an effort to balance the federal budget,an increase in Social Security taxes is passed.What is the most likely effect of this on equilibrium GDP?

Increasing aggregate demand with fiscal policy may have undesirable inflationary consequences.

President Clinton,at the beginning of his administration,increased personal income taxes on individuals with relatively high incomes.How will this change the consumption schedule?

In the determination of disposable income,transfer payments are treated as if they

In the middle of a severe recession,Congress passes an increase in the level of unemployment benefits.This would be considered by economists as a

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

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Exam 11: Managing Aggregate Demand Fiscal Policy

The Reagan tax cuts of the 1980s

If the government decides to change the level of government spending,what happens to the value of the multiplier?

Liberals tend to favor increasing taxes as the method of counteracting inflation.

Why is the personal income tax considered to be one of the main features of our modern economy that helps ensure against a repeat performance of the Great Depression?

Figure 11-2 -Which graph in Figure 11-2 best reflects a Keynesian's view of the short-run impact of an increase in the personal income tax rate?

Define the following terms and explain their significance to the study of macroeconomics: a. fiscal policy b. transfer payments c. effect of income taxes on the multiplier d. supply-side tax cuts

During the 2009-2010 stimulus debate,Republicans argued that increases in government spending would be more effective than decreases in taxes.

If increases in government spending lead to inflation,the value of the multiplier is reduced.

If wealthy U.S.consumers save most of their tax cut,this means that,compared to government spending changes,

The difference between a fixed tax and a variable tax is that

Supply-side policy is based on the assumption that people's economic behavior is not affected by taxes.

How does the multiplier for a change in government spending compare to the multiplier for a change in taxes?

Which of the following will shift the aggregate demand curve outward?

During the 2008 presidential campaign,candidate Barack Obama argued in favor of repealing the majority of the Bush tax cuts in order to increase government revenue.

As a result of the recent financial crisis,some analysts believed that the MPC in the U.S.declined.If this is true,the value of the multiplier is now

In an effort to balance the federal budget,an increase in Social Security taxes is passed.What is the most likely effect of this on equilibrium GDP?

Increasing aggregate demand with fiscal policy may have undesirable inflationary consequences.

President Clinton,at the beginning of his administration,increased personal income taxes on individuals with relatively high incomes.How will this change the consumption schedule?

In the determination of disposable income,transfer payments are treated as if they

In the middle of a severe recession,Congress passes an increase in the level of unemployment benefits.This would be considered by economists as a

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

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